One of my first thoughts when I visited Thames Town, a suburb of Shanghai, was that China most certainly has a property bubble waiting to pop. Thames Town was developed in 2006 as the English themed town in Shanghai’s “One City, Nine Towns” master plan. Today however, after almost all of the properties in Thames Town have sold, this suburb feels like a ghost town, as most units remain unoccupied. There is one business that is thriving in Thames Town: wedding photography. As if the place did no already feel enough like a movie set, while visiting on any weekend you immediately notice couples everywhere using this English architecture as a backdrop for their wedding album.
While studying in Shanghai this summer I learned that many newly rich Chinese acquire property as an investment because there are very few other legal investment options that are as lucrative. The absence of property tax also provides an incentive for hoarding property since there are no annual costs. However this is about to change in Shanghai and Chongqing as the national government announced last week that it would allow cities for the first time to impose property taxes on homeowners in hopes of stopping speculation in the housing market and to shift a major source of government funding away from land auctions to property taxes.
Patrick Chovanec, a professor Tsinghua University in Beijing was quoted by the New York Times: “They’re setting a hurdle rate for idle property. You have a situation in China where people are stockpiling idle units. And that’s because there’s no cost for doing so. But it may not be enough to push people out of property if it’s the best thing to invest in.”
Also according to the BBC the property development firm Shui On Group said that there is “no property bubble in China, and that government curbs on bank lending were making financing more difficult for his industry.”
Only time will tell if a property tax will actually curb property hoarding in China. In the mean time though Thames Towne unfortunately is not the only ghost town outside of Shanghai with owned but unoccupied housing units. There is also the German themed Anting New Town, Holland Town, and Puijan the Italian town.
The photos above are from CNN Go where four interesting articles on these European themed, but empty suburbs on the outskirts of Shanghai can be found.